Web 2.0: Land of Opportunity, or Land of Absurdity?
I'm sensing a backlash about the rising VC interest in Web 2.0. Mike Rundle takes aim at Flock in his post subtitled "The Leaning Tower of Buzz". He thinks Flock is only useful to the blog crowd and doesn't have a viable business model. Bart from Flock disagrees, saying in the comments that they do have a plan to make money and the market will decide. Then I went and read Kevin Burton's post, entitled Dot Bomb All Over Again?. Kevin blames "tech reliance on Venture Capital" for what he thinks is too much hype and too little value. Om Malik specifically references YouTube, a video-sharing service that got $5 million in funding, and says the "Web 2.0 funding frenzy is in full effect."
Ben Barren (in between subtle mocking of my paper-based millionaire status) calls all of this an "emerging land of absurdity where a live prototype that can be replicated in 90 days, that has no business model or revenue is considered a business."
So what's my opinion on all this? Well I'm right in the middle of Silicon Valley as I write this post. I've had a great time over here and I've felt lots of energy and enthusiasm from all the Web people I've met here. I've seen a Flock employee sleeping on the floor of the garage-office Flock occupies in Palo Alto, in mid-afternoon, due to overwork no doubt. People are putting in a lot of effort to build new Web-based businesses. It's OK to be slightly skeptical about the long-term value, but I have to say I still think it's a land of opportunity rather than absurdity. Admittedly I'm a pretty naive person when it comes down to it - or maybe just happy (as the Nirvana song goes).
OK so there's a lot of hype. So the VCs are throwing money around. So get to work. Build something Web-based that mainstream people will need and want. Now's the time to do it.
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I agree we should get on and build businesses, but you should nto forget that lots of energetic young entrepreneurs will actually *lose* their businesses if they sign up for over-exuberant VC funding with unrealistic expectations of return.
The key thing is to focus on fundamentals, as I wrote yesterday (http://www.headshift.com/archives/002655.cfm), before mortgaging the future.
Still ... exciting times, as you say. Much more so than last time in many ways....
Richard...good mix of being cautious without stifling innovation. It is a difficult but necessary balance. Hope you will participate in the next blogoposium, which takes a different approach to thinking about the bubble.
Sleeping because of being overworked is one thing; sleeping because of working extra hard on the right product is another. The populus will judge.
>> Build something Web-based that mainstream people will need and want. Now's the time to do it. <<
No it's not. Now's the time to hold off and watch what everyone else does. When all the hype dies down, then's the time to do it.
If you want to introduce something that is actually going to be truly disruptive you'd be stupid to do it when everyone else was being disruptive as well. Do it when everyone else is doing boring stuff.
Well there's definitely no end in sight for the exuberance of entrepreneurs in the valley or any other place around the world. So many companies launched at the Web 2.0 conference last week that I probably forgot about most already, and I'm sure that's not a good thing. The best ones will stick around because the best people and companies always prosper, but what about the mediocre ones? The ones that are VC-funded out the wazoo but somehow don't manage to turn a profit, will they hurt the next wave?
Like I mentioned in the Business Logs post, many of the companies seem really cool with great offerings, but great offerings and services don't always equal cash, revenues, loyal customers, etc. I wonder if there are solid business plans and revenue models behind some of these new "Web 2.0" companies -- but there have to be, right? A venture capital company wouldn't want to overvalue a startup, nooooo way! That never happens!
I have no doubt that Flock will be an incredible product, but we'll all have to see how they plan on making money -- my fingers are crossed that Flock doesn't turn into the next Netscape ;)
Rich, to me, I think the 2.0 love you have found in The Valley means you are a millionaire already. The $568 per link is just icing on the cake :)))
As in any startup economics, most new businesses will fail. So Web 2.0 is no different to starting a restaurant or any other enterprise. I agree with Fred Wilson that it is the 'derivative' plays that are the most worrying. Flock for example 'may' be doing something different - I like that they are going through the browser, even though the relicensing issues are a worry : But Im happy someone is trying to improve that broken consumer experience.
Cheap Rocket Fuel will be good for the quality entrpreneurs and teams, while for others they may see it as a symbol of success and a completed job, when it is indeed the start, and anyone that has spent someone elses money knows that unless they get a desired X times return in y period, the honeymoon period can quickly feel like the making of a Francis Ford Coppola movie in the wrong country.
One of the few good things about web 2.0 investing is that the first rounds are much smaller than in dotcom days. WebVan, etoys, Pets.com, etc the standard rounds had another zero on them in dotcom days : $30M-$90M rounds were common for an etail startup - alot of what went on marketing. So it's not too dire.
There are some great stories around though - Look at SugarCRM and DFJ investing again. Look at adbrite and Sequioa, Newsgator and Feedburner with Mobius, Podshow with Kleiner, delicious and indeed with Union Square (throw in simplyhired, oodle, jotspot, xfire, facebook) : These are quality.
I think sometimes because web 2.0 tries to define itself and present a postmodern thesis that it must be 'Open API' 'User participation' 'Ajax' 'To be Acquired by Google, Yahoo' 'Tags' - it misses alot of Web 1.0, Web 1.5 etc businesses that are expanding, as well as 'boring' enterprise businesses : The SugarCRM round is the most exciting VC news of the week to me.
Re Mr Cobain, who's a favourite of mine i leave this quote from the song Lithium you mentioned, which does seem to sum up the bi-polar feelings we have on Web 2.0.
"Lithium is a drug taken by people suffering from Bipolar Disorder. Bipolar Disorder is a mental illness which consists of a person who experiences both manic and depressed states. This is a very difficult illness to have, and the song appears to speak to the struggles associated with this disease.
Kurt Cobain writes " I'm so lonely" and seconds later states "I'm not sad". Kurt constructs a very interesting song which focuses on stating many opposite and confusing feelings, it results in a person that sounds as if they are experiencing feelings from both a manic and depressed state. Kurt Cobain certainly had his own bout with depression, and unfortunately ended up ultimately taking his own life.
"I kill you - I'm not gonna crack"
Richard, motivated by yours and others' post-Web 2.0 concerns, the Bubble Calibration Instrument is available for consultation:
http://www.stevekrause.org/steve_krause_blog/2005/10/bubble_calibrat.html